Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Attention: XXXXX
XXXXX
Case Number: 100974
Business Number: XXXXX
July 10, 2009
Subject:
GST/HST RULING
XXXXX Program
Dear XXXXX:
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (XXXXX) customer accounts for the XXXXX Program financial incentive. We apologize for the delay in responding.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand that on XXXXX, XXXXX and the XXXXX entered into a XXXXX Program Agreement whereby XXXXX would deliver the XXXXX Program to its customers with funding provided by XXXXX. The details of this agreement and the XXXXX Program are as follows.
1. XXXXX.
2. XXXXX.
3. XXXXX.
4. The objectives of the Program were to:
• XXXXX;
• XXXXX; and
• XXXXX.
5. Pursuant to the XXXXX Agreement between XXXXX and XXXXX, XXXXX was approved for funding to administer and deliver the Program.
6. Section XXXXX of the XXXXX Agreement states the relationship between XXXXX and XXXXX is that of an independent business relationship and in no way does the agreement contemplate or create a relationship of employment, partners, joint venturers, fiduciary, principal and agent or any other relationship.
7. XXXXX. The customers qualified if their prorated energy consumption for the Savings Year represented a reduction of XXXXX% as compared to the Base Year weather normalized prorated energy consumption. The threshold of XXXXX% represented the XXXXX% Program savings requirement plus a tolerance of plus XXXXX% to accommodate calculation assumptions related to prorating and weather normalization.
8. If customers reduced consumption by XXXXX% between the two periods, they received a financial incentive equal to XXXXX% of the total amount of their prorated XXXXX period billing.
9. Section XXXXX of Schedule "XXXXX" to the XXXXX Agreement required XXXXX to market and communicate the Program to its customers.
10. Section XXXXX of Schedule "XXXXX" to the XXXXX Agreement required XXXXX to apply the financial incentive applicable to each customer that qualified as a participant in the Program as a credit on the first electricity bill sent to the customer after the completion of the Program Season (XXXXX), or where that was not practical for XXXXX, to apply the credit on the second electricity bill sent to the customer following completion of the Program Season.
11. Customers were automatically enrolled and became participants in the Program if:
• XXXXX, and
• XXXXX.
12. XXXXX.
13. XXXXX.
14. XXXXX, as Program Manager, was to be reimbursed its actual costs incurred in delivering the Program. At the end of the Program, the following items would be paid to XXXXX in accordance with program milestones and the XXXXX evaluation of performance:
• XXXXX, and
• XXXXX.
Ruling Requested
1. Should the GST be charged on the total amount of the customer's electricity invoice before the XXXXX% financial incentive is applied, or is the financial incentive netted against the total of the invoice and GST is charged on the net amount?
2. If GST is charged only on the net amount invoiced, does XXXXX collect GST from XXXXX?
Ruling Given
Based on the facts set out above, we rule that:
1. GST applies on the total amount of the consideration payable for the electricity before the XXXXX% financial incentive is applied.
2. As stated above, GST applies to the total amount of the electricity charged, and not on the net amount invoiced.
Explanation
Although not asked in your request for a ruling, we would like to point out that XXXXX is required to collect GST from XXXXX on the consideration payable for its taxable supplies made to XXXXX under the Program. This consideration includes the management fees, bonus payments, and the reimbursed costs, other than the financial incentives.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9699. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
M. Patricia Taylor, CMA
Industry Sector Specialist
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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